– Written by
David Woodsmith
STORY LINK Pound Sterling to Dollar Forecast: Can GBP/USD Hold Above 1.37?
The Pound to Dollar exchange rate (GBP/USD) has extended gains to the 1.379 area, breaking above four-month best buying levels as persistent dollar weakness offsets overbought conditions ahead of the Federal Reserve decision.
GBP/USD Forecasts: 4-Month Highs
The Pound to Dollar rate surged to 4-month highs above 1.3700 on Monday before a retreat to 1.3675 on Tuesday as the dollar stabilised, although underlying jitters persisted.
Precious metals maintained a strong tone, limiting the dollar recovery, while gains in UK equities helped support the Pound.
According to UoB; “There has been no further increase in upward momentum, and with conditions still overbought, we expect GBP to consolidate today, most likely between 1.3620 and 1.3715.”
Key resistance levels remain at 1.3725 and 1.3790.
Currency markets overall were calmer on Tuesday. There was no evidence of intervention to support the yen and the Japanese currency lost ground which provided an element of dollar relief, even though tensions remained high.
Save on Your GBP/USD Transfer
Get better rates and lower fees on your next international money transfer.
Compare TorFX with top UK banks in seconds and see how much you could save.
The Euro to Dollar (EUR/USD) exchange rate also hit 4-month highs at the key resistance area around 1.19 before a tentative retreat with the correction also curbing GBP/USD gains.
There is still an important element of uncertainty over US policy. Overnight, President Trump threatened additional tariffs on South Korea to 25% from 15% with claims that Korea was being too slow in implementing the trade deal agreed last year.
MUFG commented; “Heightened US policy uncertainty at the start of this year is contributing to a loss of confidence in the US dollar in the near-term as evident by the recent divergence between yield spreads and US dollar performance.”
If the dollar can re-engage with yield spreads, there will be scope for a dollar rebound.
ING commented; “As for the broad dollar trend, we appreciate that strong flows into emerging markets are a mild dollar negative. But US data is holding up well and we can see tomorrow’s FOMC meeting as a mildly dollar-positive event risk.”
There are very strong expectations that the Fed will hold rates at 3.75% at Wednesday’s policy meeting.
Comments from Powell will be watched very closely, especially given the on-going uncertainty surrounding the next Fed Chair and the Administration’s attempt to dismiss Governor Cook from the Fed Board. Commonwealth Bank of Australia currency strategist Carol Kong commented; “I think markets will probably be focused on questions about the Fed’s independence rather than the rate outlook.” She added; “If Powell does choose to resign as a governor after his Chair term expires in May, that could actually add to the perception that he is capitulating to political pressure, and that could add to concerns around Fed independence being compromised… (and) it is a downside risk to the dollar.”
International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.
TAGS: Pound Dollar Forecasts
